Question

One of your customers is delinquent on his accounts payable balance. You’ve mutually agreed to a repayment schedule of $680 per month. You will charge 1.4% per month interest on the overdue balance. If the current balance is $17,800, how long will it take for the account to be paid off? (Do not round intermediate calculations. Ensure to round up the final answer to the nearest whole number.)

Months for account to be paid off _______ months.

Answer 1

we will use the following formula of calculating equal monthly installments:

PVA = C({1-[1/(1+r)^t]}/r)

where PV = presnet value = $17,800

C= payment per period = $680

r = rate of interest p er period = 0.014 (1.4/100)

$17,800= $680 ({1-[1/(1.014)^t]/0.014}

1/(1.014)^t =1-{[17,800/($680)]*0.014

1/(1.014)^t= 1-0.36647

(1.014)^t=1/0.63353

(1.014)^t=1.578457

power of 33 will make (1.014)^33 =1.578457 (nearest month)

Answer 33

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